EPAct 179D Experts

"The least expensive kilowatt, is the one not used."

- Jacob Goldman

Retailers Are First Movers for New HVAC Tax Incentives that Reduce Operating Costs

New HVAC Tax Incentives Effective January 1, 2014 are
particularly beneficial for retailers. We are seeing that the
new rules are changing the way retailers replace systems. HVAC
related electricity costs are a retailer’s largest energy
related operating cost. The nation’s retailers are feeling
tremendous economic business pressure and some commentators
predict that one third to 50% of today's current retail
locations will be closing. Those that survive this adverse
environment must substantially reduce their ongoing operating
costs.

Retailers Business Challenges and the
HVAC

The 2013 holiday season and early 2014
results for many retailers have been poor. Many retailers are
closing underperforming stores and many shopping centers have
high vacancy rates. This environment enables more
opportunistic retailers to upgrade to more desirable locations.
Retail owners, operators, landlords and tenants need to
understand the large economic benefit from HVAC tax and business
planning.

Vacant Retail Location HVAC Tax
Planning

The majority of vacant store locations
have prior generation highly energy efficient package units and
chillers that are past their 15 year useful life. With
advanced planning the HVAC older units can be replaced with
current generation more energy efficient units that are often
eligible for utility rebates and the new tax savings. Both
retail landlords and tenants are eligible for the new HVAC tax
incentives. Landlords can use the new tax incentives
to replace worn units and attract informed tenants. Tenants can
use the new tax savings to reduce operating costs. Those
retailers who wait until the very last minute when all units
need to be replaced typically lose out on energy savings,
rebates and the tax savings.

Don’t Delve Below Twelve

Most retailers utilize package units for
their core HVAC needs. Package Unit energy efficiency is rated
by what is called EER or Energy Efficiency Rating. The higher
the rating, the more efficient the unit is. We tell our owner
operator landlord and tenant retail clients to "not delve below
12 when replacing worn units".

The higher EER's for some of the country’s leading package unit
brands are as follows:

Manufacturer

Series

Highest EER

AAON

RN Series

12.4

Carrier

Weathermaster

12.2

Comfortmaker

RAH Series

12.2

Fraser-Johnston

ZW Series

12.1

Heil

RAH Series

12.2

Bryant

Preferred Line

12.2

Lennox

Strategos

12.8

McQuay

MPSH Series

12.2

Rheem

RLRL Series

12.2

Ruud

RLRL Series

12.2

York

Sunline Mangnum

11.6

The HVAC tax deduction results for some of our leading retail
clients are as follows:

East Coast Retailer

$325,000 Tax Deduction

Southeast
Furniture Retailer

$4.8 million Tax Deduction

Midwest
Electronics Retailer

$250,000 Tax Deduction

Midwest
Clothing Retailer

$900,000 Tax Deduction

Conclusion

Those retailers that make the effort to
understand the new HVAC tax incentives work have the opportunity
to substantially reduce their operating costs in a tax effective
way. Those who don't utilize the new benefit will even be
less competitive in an increasingly difficult market.